Besides spending on Christmas gifts, feasts and other treats, a custom that Panzer likes to do is to take stock of his financial performance from being the fund manager of Panzer’s Net-worth cum daughter’s colleague tuition fund.

Analysis of the year gone past (so far)

The following chart shows how Panzer has performed in the months of 2009.

Generally, Panzer has been making steady realised gains from dividends (36%), capital gains/losses (59%) and blogging income (5%). July saw a big realised loss because Panzer cleared out many of his old holdings bought at high prices when he was young and ignorant. Now that Panzer is older and still ignorant, he has done a round of housekeeping to only buy quality stocks, in general blue chips with very solid business fundamentals.

August 2009 saw Panzer reap capital gains from sale of SPC to PetroChina resulting in a net gain even after realising his losses from sales of (crap) stocks he had mistakenly bought in his ignorance and bout of irrational exuberance.

Panzer’s Portfolio

The current older and still (slightly less) ignorant Panzer now manages his portfolio on at a level of 50:50 cash-equities ratio with investment limits on equities set to 75% of his investible net worth. On a steady state, Panzer should have 50% of his net worth in cash/cash equivalents allowing himself 25-30% core holdings in strong dividend yielding stocks while the remainder 20-50% is available for punts.

He has decided to temporarily put on hold his investment property plan in the light of possible asset bubble in the private residential segment and also because it’s easier to sleep at night holding onto to more cash than an illiquid asset such as investment property which typically yields only 3-5% after expenses. Panzer also wishes not to deal with the stuff that comes with being a landlord for the time being.

The recent announcements of more land supply for the mass market private residential segment also means there is less upside and more choices going forward. Panzer may still consider investment property if yields can sustain higher than 5% which would be challenging under present conditions.

Panzer’s holdings currently comprise: SPH, Singpost, Starhub, FSL, F&N and Singtel (CPF). He intends t0 hold them for LONG TERM but then LONG TERM can mean < 1 year if he feels like it because Panzer follows Temasek and GIC’s approach to investment.

Going forward

Panzer feels that this past year of investing (with lots of recent punting) has revealed to him a few things.

One – there are no rules to investing in the market.

Two – your guess is as good as mine.

Three – make sure you have sufficient cash for opportunity buys or to cushion your own mistakes.

Panzer wishes one and all a Merry Christmas.

Be well and prosper.

P.S. Panzer’s return on assets for calendar year 2009 is 6.71%. Panzer derives this figure by taking realised gains/losses and dividing it by investible net worth at lower of cost or market. It’s a simple thing, no need for super accuracy but good enough to know if I beat fixed deposits rates x 2.

Flickr image "Chesire Cat" by fofurasfelinas

One of the areas that I encountered in my career as an auditor is this animal know as CAATS. It’s not the meow-meow animal we all know and love but CAATs is an acronym to refer to Computer-assisted audit techiques or audit tools.

ACL and IDEA
Starting out and now continuing in my career as a Certified Public Accountant (Non-practising) and Certified Internal Auditor, I came to understand and make use a generalised audit software known as ACL or Audit Command Language back in the mid 90s. This allowed me to understand a bit more about data and how to analyse relationships between certain financial figures and transactions and to zoom in on suspicious transactions.

If you are a CPA or aspiring CPA and CIA to be, it bodes well if you are open to Information Technology and can make use of at least one type of CAATs be it Excel spreadsheets or more sophisticated tools such as ACL or IDEA.

Leveraging on IT is arguably one of the most common things you would need to do as a CPA or CIA and in this technologically changing world, you cannot be effective in your career as a CPA unless you can harness the power of technology to help you balance your accounts, find interesting trends and relationships between operational data and the financial figures and be able to make use of such tools to put into place fraud mitigation strategies as an auditor.

In my own career, I’ve realised that being a CPA requires diverse skills. Being comfortable with figures is one and the ability to apply accounting and audit knowledge are important basic skills. But other overall corporate career skills such as written expression, oral expression and emotional quotient all help to make you more effective in a corporate setting.

What special super-duper ability do you have to enhance your edge in your own career?

Share with Panzer in the comments section.

Be well and prosper.

I’ve decided to do a wordle word cloud to show a snapshow of what the forummers are posting today 1 Nov 2009.

Not too surprising that the key words for today are that there will be a selldown on Monday on STI because Dow Jones Industrial Average lost about 2.5% or 200+ points on Friday.

Be well and prosper.

Flickr image "River flow" by Britanglishman

Following my post about “Flow: The Psychology of Optimal Experience“, I begin to see how important our own perceptions play in determining if we are happy or not under all circumstances.

One of the benefits of trading in stocks and shares is that it forces you to confront your naked fear and greed whenever you are about to buy or sell shares. Nothing strips away how good/bad you are at stock trading (or investing) then looking at your profits and losses incurred on the trade.

You feel happy when you’ve made the right call and you feel terrible if you’ve lost money and even worse if the loss is realised.

It is from this experiences that I realise financial freedom by itself will not make me happy. It is how I make use of the financial freedom status to create for myself an optimal flow experience in all aspects of my life. Even the euphoria of trading wins fade after a while and I look out for the next “high” from jeeping/panging an equity position.

Happiness and sadness that is dependent on market conditions sets us up for a life of emotional roller-coaster. This cannot be the receipe for a life filled with optimal experiences.

So how can you structure your life into a flow experience even as you pursue financial freedom?

How pursuing financial freedom helps you achieve flow

A challenging activity that requires skills

Moving from a net-worth position that is negative to a positive one is challenging. It requires you to have skills in budgeting, controlling your desires to spend and to live within your means.

Merging of action and awareness

As you track your net worth towards a bigger and bigger positive number, you tend to feel that your day to day thriftiness does translate into a bigger goal i.e. bringing you closer to financial freedom where your income from savings and investments is able to fund your day-to-day living expenses.

Clear goals and feedback

Nothing clarifies more than your net worth position at the end of the month and whether you’ve spent more than you’ve saved or you’ve manage to live way within your means.

Concentration on the task at hand

Just as you focus on eating that bit less, refraining from softdrinks and living a healthy lifestyle to keep healthcare costs low, energy levels up for work and play, you tend to align your daily goals to the overall plan of being financially free.

Paradox of control

The more your net worth comes into your direct control, the more powerful you feel in your ability to control your financial destiny in life.

Loss of self consciousness

Whether you keep up with the Alis, Lims or Muthus is not so important when you focus on financial freedom. It’s not about what watch you wear but how big is your net worth.

The transformation of time

Time flies when your daily activities are aligned to your life goals. The main thing I realise about pursuing financial freedom is that the process is enjoyable by itself. Seeing my month end balances with savings makes me look forward to the passing of each day and month as I move closer to my goal of financial freedom. The journey is just as fun as the destination.

Be well and prosper.

Flickr image "Flow" by mr fairuz

One of the areas I continue to develop towards financial freedom is to open my mind to positive influences and ideas from quality sources. Many of the new books I read nowadays are the result of recommendations from other authors and blogs that I follow.

The current book that I’ve just finished reading is “Flow: The Psychology of Optimal Experience” by Mihaly Csikszentmihalyi. The book basically shares with us the steps towards enhancing the quality of life.

Reading is arguably the most important avenue to learn new knowledge. Many great thinkers, philosophers and practitioners in the fields ranging from financial freedom to human pyschology have already documented their great ideas, thoughts and wisdom in the written word. Why not tap on their knowledge, expertise and experience to gain some insights about how one should go about living one’s life?

It is with this mindset that I approached “Flow”.

What “Flow” is about

The book’s blurb shares what “Flow” is about. It really documents how the author

has been studying states of “optimal experience” – those times when people report feelings of concentration and deep enjoyment. These investigations have revealed that what makes experience geniunely satisfying is a state of consciousness called flow – a state of concentration so focused that it amounts to absolute absorption in an activity.

The main idea that the book leaves with us is that:

Flow: The Psychology of Optimal Experience reveals how this pleasurable state can, in fact, be controlled, and not just left to chance, by setting ourselves challenges – tasks that are neither too difficult nor too simple for our abilities. With such goals, we learn to order the information that enters consciousness and thereby improve the quality of our lives.

What I got from Flow

The main lesson that I got from “Flow” was that the elements of enjoyment comprises the following:

1. A challenging activity that requires skills
2. Merging of action and awareness
3. Clear goals and feedback
4. Concentration on the task at hand
5. Paradox of control
6. Loss of self consciousness
7. The transformation of time

What this means is that for many people, work or career is actually when we are enjoying ourselves when we get immersed into what we do. Being financially free will free us to engage in leisure activities full time, but such activities won’t make us happy unless they meet the elements above.

My own experience in moving from a crappy job environment to a more pleasant and fulfilling one has reinforced the reality of what flow means. Somedays at work, the hours just while themselves away as I’m engaged in my audit assignments and working with my team.

Literally, the movement of time from Monday to Friday happens so fast that I sometimes wonder where it all went. I count myself fortunate that my current work place gives me a lot of job satisfaction and allows me to function in a flow on majority of the days I am in office.

Meaning in “Flow”

Hence, I’ve increasingly come to realise that achieving financial freedom while being an important goal, is not important just for itself. It is equally important to structure your life to do something meaningful and is able to involve the elements of enjoyment.

A life of pleasure seeking everyday without much meaning and purpose after being financially free can potentially result in empty and hollow lives. That’s why sometimes we read in papers of rich and famous celebrities who have it all in material wants but still end up with wasted lives through alcoholism, drugs and suicide.

Even as I continue on my journey towards financial freedom, I become more aware that paradoxically, it’s not just about hitting my target of $xxx,xxx in investible net-worth so that I can become financially free that will ultimately make me happy.

Happiness has to come from within instead and whilst working towards the my target of financial freedom, I need to seek challenges that continue to allow me to practice my skills, abilities and to create meaning in my life.

How do you think you can achieve flow?

Would it be where you are now or only if you achieve financial freedom?

Share with Panzer.

Be well and prosper.

The hokkien expression goes, “要做就不要怕，要怕就不要做！”. (ai zo mai kia, ai kia mai zo) Loosely translated, it means, “if you want to do something, don’t be scared, but if you are scared, then don’t do it!”

Read more here in Panzer’s old blog Five Cents Ten Cents at Blogspot.

Flickr image "rule of thumb" by greeneydmantis

Many of us who are working our way towards financial freedom also engage in the frequent occasional bout of speculative activity of buying/selling shares and selling/buying intra-day or within a few days.

This type of activity comes with risks and rewards.

The risks are being stuck in counters and wishing one had not had a case of “itchy fingers”.

The rewards are both the “high” of thinking that one just managed to out-smart the market as well as earning some kopi money.

Panzer also engages in this type of activity on occasion and sometimes makes and sometimes loses money. In the end, Panzer learns more about the market and himself as he will encounter Mr. Greed and Mr. Fear whispering into his ear when he is thinking if he should “jeep” (buy or take a long position on a counter) or “pang” (throw or sell a counter).

Whether he “jeep” or “pang”, one thing’s for sure, his blood pressure and heart rate usually goes up. So Panzer has decided to put up his equity trading rules of thumb as he reflects on what happened when he made the right speculative bets.

Panzer’s Equity Trading Rule of Thumb (PETROT)

#1 Never buy when market chiong strongly

So far, most of Panzer’s punting mistakes are to “chase” a stock when sentiment is buoyant. To make money, you must either be in front of the crowd or 1 day before the crowd. So buy when people are selling, and sell when people are buying.

#2 Play with money you can afford to lose

Panzer generally hates to lose money as he is human. So he must keep reminding himself  to only bet with money he really set aside for “play”.

#3 Only bet on those counters you are familiar with

Panzer’s bobo-shooter targets that lost money for him were counters he didn’t have a good “feel” of pricing versus valuation. In general, he should limit himself to only betting on the list of his watch list and stick to it.

#4 You don’t always have to take a bet

As some esteemed forumer ever mentioned, the market is here for you. Even if miss the “boat”, the tide will ebb and flow creating opportunities for taking bets.

#5 Low can get lower, high can get higher

Panzer can never time the market all the time. What’s important is to bet within limit and to know that $10 profit is better than $10 loss.

What are some of your rules of thumb for speculative activity?

Be well and prosper!

Flickr image "Imaginary Money Graveyard" by Eifachfilm Vacirca

After having read both his books, “The Black Swan” and “Fooled by Randomness” written by Nicholas Nassim Taleb, I’ve been rethinking my whole paradigm about achieving financial freedom.

For those of you who haven’t heard about Nicholas Nassim Taleb, you can read about him here or visit his website.

Systemic Risks to Financial and Economic Life

Nicholas Nassim Taleb (NNT) has been talking about the systemic risks posed by the rising complexity of financial markets coupled with the over-leveraging scenarios that blew up in the world’s face during the sub-prime crisis. This was the climax of the housing asset bubble building up in the US and spread to the world in the form of collaterised debt obligations (CDOs) that were too complex for even financial institutions and regulators to understand.

Even in Singapore we were not spared as innocent uncles and aunties along with “savvy” investors were hit by the Lehman minibonds scandal that saw a number of retirement savings go up in smoke due to the credit default of Lehman Brothers.

A World of Black Swans

His views resonate with me and I agree that we live in a world of black swans and as human beings our ability to calculate risks are actually quite poor although we give ourselves as a species too much credit in thinking we can predict the tail events or outliers e.g. subprime, great depression, dot com crash etc. and impute specific measures of the probability of such catastrophic events happening.

I watched one of his more recent television appearances on video and his take on the stock market as a place to park investments for retirement is totally against the conventional wisdom. NNT feels that the stock market has some elements of a ponzi scheme in that the stock market rewards earlier investors with monies brought in by later investors.

The speculative part of the stock market which I’m currently engaged in tells me that it’s true. In that you buy when stock prices fall in anticipation that a greater fool investor will buy the same stock from you at a higher price later. The reality of this struck me during the height of the subprime crisis when market prices of stocks collapsed and if you were looking to cash out and sell your equities for retirement cash funding needs, then you’re in trouble.

Rethinking How to Invest for Retirement

NNT thinks that retirement savings should be mostly in cash and cash equivalents. He also believes we should have “hard assets” but not necessarily property. I think he’s referring to gold/silver or something tangible but it was not clear from the interview.

He says that we should invest in stock markets with “play” money because if another systemic shock like sub-prime happens again, and it’s likely to happen as the banks that are too big to fail just got bigger and the people (investment bankers, regulators etc) who brought us to the brink are still around.

The more I read and listen to NNT, the more I believe there will be more shocks in the future as history repeats itself when we don’t learn from the lessons of the past.

There is still a lot of debt going around global financial markets and even in Singapore there is a property bubble building up as evidenced by the recent quick run-up of property prices that appear to be out-pacing the real economy in terms of wages and real income.

The stock market and property market cannot go on sustained climb without end if the economic fundamentals are still weak globally and in Singapore as well.

How Now Panzer?

Going forward, I still think being overweight in cash and cash equivalents and underweight in equities is still my way of dealing with the uncertainly in the short-term. Deploying my capital to fund self-sustaining streams of cash flows from my blogging or blog monetisation, investing in real-world businesses that generates a returns in an area I’m interested in appears to be the steps I should pursue.

I still intend to work as an employee and build up my CPF retirement funds but will deploy investible net worth to more real-world producing assets and need to prepare myself to understand what opportunities there are out there for me.

How will you deal with this uncertainty of market shocks going forward?

Share with Panzer.

Be well and prosper.

October brings back images of stock market crashes, the falling of the sky and other doomsday scenarios on the scale of apocalypses. It is not surprising that weak employment data last Friday in the US has made equity markets jumpy.

Currently, I’m adopting a nimble strategy of being overweight in cash and eyeing the bluest of blue chips for medium to long term growth and not over-committing to having up to 80-90% of my investible capital in equities (as I used to in the past) as I’ve learnt the value of having some portion of your investible capital in cash and cash equivalents because the world changes too fast. Even quick punts can net one returns exceeding 2 x fixed deposits.

What is your current strategy in the light of October volatility?

Share with Panzer in the comments page.

Be well and prosper.